11 September 2017 – Cinco Días
It is becoming increasingly more apparent, with the statistics on the table, that when we talk about the recovery of the real estate market, in reality, we are referring to just a few markets. The Index of House Prices (IPV) published on Friday by Spain’s National Institute of Statistics (INE) shows this very clearly.
The study, which INE prepared using data provided by the notaries, concludes that house prices rose by 5.6% on average during the second quarter of this year compared to the same period last year. In this way, in isolation, it seems that rather than recovering, the market is heading directly towards another bubble, given that the aforementioned figure is no more and no less than three and a half times the level of inflation (which amounted to 1.6% in August). Nevertheless, an analysis of the figure by regions shows that the gulf between what is happening in one region and what is happening in others is persisting and even intensifying in some cases.
Madrid led the ranking of real estate price rises for another quarter. Homes in the region rose by 10.9% per annum on average during Q2, compared to 10.6% p.a. the previous period. In this way, price increases consolidated and even accelerated by three decimal points, the same increased recorded by the national average, which rose from 5.3% in Q1 to 5.6% in Q2.
The second region with the highest price rises was again Cataluña, where the recovery accelerated by even more (five decimal points) up from 8.8% to 9.3%. And the podium of the top three regions where house prices are rising the fastest was completed by the Balearic Islands, where the increase rose by almost two percentage points to 7.4% in Q2, up from 5.5% in Q1.
Beyond those three autonomous regions (…), the truth is that the price rises are proving a lot more moderate. In fourth place is País Vasco, where prices rose by 4.5% on average in Q2, followed by Cantabria, at 4.1%.
These increases contrast significantly with, for example, the 2.4% recorded in Andalucía, a region with a high proportion of tourist housing, and the Community of Valencia, where house prices rose just above the rate of inflation, by 1.8% p.a. in Q2, i.e. by one tenth less than the previous quarter.
In Castilla-La Mancha, Extremadura and Murcia, house prices rose by less than 1%. And Asturias was the only autonomous region where house prices decreased, by 0.3%, in Q2, after rising by 1.4% in the previous quarter.
How come the national average is 5.6% then? Essentially, due to the greater weight that the transactions undertaken in those regions that have the most expensive homes.
Another phenomenon that INE highlighted in its explanatory note that accompanied the data is the different behaviour in terms of the prices of new homes and second-hand properties. The first saw their prices increase by one percentage point less (4.4% in Q2 compared to 5.5% in Q1). The reason for that deceleration is that increasingly more developments are being started in places where companies are detecting that more demand exists. And since the supply is increasing, so the price rises are, logically, more moderate.
By contrast, in the case of second-hand homes, the recovery in prices remained above 5% p.a. for another quarter and accelerated to increase by 5.8% on average in Q2 compared to 5.3% in Q1.
In this way, house prices have now recorded thirteen consecutive quarters of increases, in other words, they have been rising for just over three years. However, according to various studies, they are still more than 40% below the maximum prices recorded between the end of 2007 and the beginning of 2008. (…).
In terms of the future, Moody’s estimated recently that house prices will continue to rise by around 5% p.a. until 2019 (…).
Original story: Cinco Días (by Raquel Díaz Guijarro)
Translation: Carmel Drake